Best mid-cap stocks for the long term? Here are 5 to watch out for | Daily News Byte

However, with this mindset, it’s easy to lose sight of the long-term potential of stocks.

While past performance is no guarantee of future returns, long-term investing in stocks generally yields positive results, given enough time.

But with so many choices available, which stocks are worth your money?

When looking for stocks to buy and hold for the long term, it’s important to consider companies with strong fundamentals and solid growth prospects.

Investing in mid-cap companies can offer investors the best of both worlds. According to the market regulator, companies ranked from 101 to 250 in terms of market capitalization are known as mid-cap companies.

Their market capitalization usually ranges from ₹50 billion to ₹200 billion, which means they are big enough to be considered institutional investments, but small enough that you don’t need a lot of money to own them.

Here are five you can turn your attention to.

#1 Jubilant FoodWorks

First on our list is Jubilant FoodWorks.

The company is part of the Jubilant Bhartia Group. It has two strong international brands in its portfolio, Domino’s Pizza and Dunkin’ Donuts.

What makes this a stock with long-term potential?

Since 1996, the company has had exclusive rights to develop and operate Domino’s Pizza restaurants in India. It is the largest Domino’s franchisee outside the US. It has also been awarded exclusive brand rights for Sri Lanka, Bangladesh and Nepal.

While other KSRs expanded their stores, Jubilant was at the forefront.

As of March 2022, the company had 1,623 stores (1,396 in 2021). The outlet reach will increase to 1,898 stores by the end of financial year 2023 and to 2,123 by 2024.

Much of this growth was due to increased demand during the pandemic. During the pandemic, the desire to stay indoors ultimately accelerated the shift of consumers to online food ordering. Jubilant managed to take advantage of the opportunity.

Over the past five years, the company’s revenues have grown at a CAGR (compound annual growth rate) of 11%, while profits have grown at a CAGR of 45%.

Its return ratios are also strong at over 20%. Despite continued capital expenditure, the company’s debt-to-equity ratio is low at 1.1k.

With more Indians eating out and online delivery also on the rise, Jubilant’s future looks bright. The volume is also huge due to the insufficient penetration in the sector and the increase in the overall income level of the population.

#2 Marisa

Second on our list is Marico.

The company deals in a diverse range of products, including hair care, skin care, edible oils, men’s care and health food.

Some of its brands include Parachute, Saffola, Livon, Nihar and Beardo. The company also has a market leadership position in most of its product categories.

So why should Marico be on your watch list?

Despite being a commodity company at its core, what has helped the company stay relevant all these years is its focus on innovation.

The company has been constantly innovating to cater to an increasingly urban India. This is expected to help it outperform its peers in the future as well.

Not all of Marico’s innovations succeeded, but the lessons learned from the failed experiments contributed to the success of subsequent brands.

The company has grown inorganically through acquisitions over the past few years and has taken major brands under its umbrella. The company spent millions of dollars on these acquisitions. He recently bought a 54% stake in a health food startup, True Elements.

Keeping up with the times, the company is also going digital.

Marico aims to accelerate its digital transformation journey by building a portfolio of at least 3 digital brands, either organic or inorganic, to achieve a combined turnover of ₹4.5-5 billion by FY2024.

It expects 15% of its total revenue in the next few years to come from its online/e-commerce business, up from 9% currently.

Over the past five years, Marico’s revenue has grown at a CAGR of 10%, driven by growth across all product categories. Net profit also grew at a CAGR of 10% during the same period.

Complementing the company’s strong market position is a return on capital employed (RoCE) of 42.7% and a return on equity (RoE) of 36.6%. It also has minimal debt on its books.

Going forward, with an increase in premium product range, improved international business profitability and strong pricing, Marico is expected to continue its strong performance in the years to come.

#3 Cop

Third on our list is Policab.

The company is the number one integrated manufacturer and supplier of state-of-the-art wires and cables. In the organized segment, it has 20-22% participation.

So why should Policab be considered long-term?

In the last few years, Policab entered the switch segment and further diversified into the fan and LED lighting segment by setting up manufacturing units in Nashik and Roorkee.

Furthermore, its strategic presence in Engineering, Procurement and Construction (EPC) supports its core business. The merger of the two paves the way for the company’s long-term growth.

But going forward, the FMEG segment, most of which is still unorganized, can be a big driver of growth. Especially for the production of components of critical electronic products.

Policab’s market position is facilitated by a strong distribution network of over 2,800 authorized dealers and an established brand. The company has a significant market share in western and southern India, which contribute around 70% of its revenue.

But it is ultimately looking at a presence in India.

The company also wants to create a passive digital infrastructure for the IT sector before the introduction of 5G technology. Policab’s network supports high-speed broadband, IoT-connectivity and other newer and emerging applications with the help of cable cables.

In line with the demand for its products, Policab’s revenue has grown at a CAGR of 17% over the past five years. Net profit also grew at a CAGR of 31%.

Policab had an IPO in 2019 and used most of the proceeds to minimize the debt on its books. The company currently has negligible debt on books and healthy rates of return with RoCE of 22.5% and RoE of 17.5%.

The stock has a bright outlook and if held long could allow investors to reap the benefits of the rapid turnover of electrical goods.

#4 Mindtree

Fourth on the list is Mindtree.

The company is a multinational information technology services and consulting company. It is a part of L&T Group.

Why are stocks worth holding long-term?

Mindtree has an established market position in the IT sector. It also has a diverse portfolio of services with significant presence in e-commerce, cloud computing, digital transformation, data analytics and enterprise resource planning.

This ensures a wider customer reach and helps him offset any negative impact of one segment from the increase in revenue from another segment.

The company is also of great strategic importance to L&T with the IT and technology business accounting for more than 20% of the total consolidated revenue. And in turn it benefits from its strong background in securing big deals.

Despite the current slowdown in demand in the IT sector, the company has a backlog of over $1 billion.

Mindtree recently unveiled a three-pronged strategy to maintain revenue growth momentum. The Bengaluru-based IT company said it plans to accelerate its core portfolio, expand its emerging portfolio and incubate its new portfolio.

In addition, the company has strong financial results. In the last three years, Mindtree’s revenue has grown at a CAGR of 15%. Net profit also jumped 32% over the same period.

Return ratios were robust with RoE of 33.8% and RoCE of 41.5%. To add to that, the company has a low debt-to-equity ratio of 0.1k. leaving enough room for borrowing.

Going forward, a strong order book is expected to boost revenue and margins in the medium term.

#5 Aegis Logistics

Last on our list is Aegis Logistics, a leading integrated logistics company.

It deals with import, export, storage and distribution of liquefied petroleum gas (LPG). The company is also involved in the distribution of other products such as chemicals, petroleum oils, lubricants (POL) and vegetable oils.

What does this do to long-term stocks?

Aegis Logistics caters to and has established relationships with a diverse, strong customer base. Some of its clients include BPCL, OMFC, Shell, Reliance and HUL.

The company enters into annual fixed price contracts with some (about 50%) of its customers. These are take-or-pay contracts where the customer fixes the quantities/storage capacity to be made available to them over a specified period.

This provides revenue visibility for the mentioned capacity in the liquid logistics division.

In the procurement of gas, it acts as an arranger for its customers and suppliers with whom it has concluded successive contracts with common price conditions, exchange rate and credit period conditions.

The company has a joint venture with Itochu, a Japanese company, to help it source LPG at a lower price. It has also formed a joint venture with the world’s leading tank storage company, Royal Vopak, to expand its product storage to other chemicals and explore opportunities in renewable energy.

Aegis Logistics is undertaking capacity expansions at various ports to meet the growing demand for oil and gas.

In the financial year 2022, it secured an international tender for the procurement of 800 thousand metric tons of LPG. The company also signed a 35-year contract with Shell for oil storage.

Over the past five years, the company’s revenue has grown at a CAGR of 3%. However, net profit rose by a healthy 25%.

Aegis Logistics paid off its debt during the year and the company is debt free. Its return ratios are also strong at over 15%.

Going forward, new orders, capacity expansion and diversification into other products are expected to drive the company’s revenue growth.

Conclusion

Every investment carries potential returns and risks. The key to successful investing in any type of company, small or large, is to minimize risk.

Focus on building a sound investment strategy. If you don’t have one, start working on it. If you do, make sure your investments are on track and continue to reflect your investment horizon, financial situation and risk tolerance.

,Disclaimer 1: This article is for informational purposes only. It is not a stock recommendation and should not be treated as such.

Disclaimer 2: The promoters of HT Media Ltd, which publishes Mint, and Jubilant Foodworks are closely related. However, there are no cross promoter owners.

This article is syndicated from Equitymaster.com